Family & Relationships

Prenuptial Agreements: Everything You Need to Know

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Think you have to be an A-list celebrity, old money, or — frankly — old to need a prenuptial agreement?

Not so. Prenups are for your protection at any age.  Assuming millennials follow more or less the same pattern as their boomer parents, about half of American marriages will continue to end in divorce.

People used to view prenups as unromantic, insulting and even bad luck, but many now recognize them as valuable premarital financial and communication tools. Yes, the primary function of a prenuptial agreement is to protect the assets and interests of both parties in the event of divorce or death.  But it also provides a great opportunity for a soon-to-be married couple to have a serious, honest discussion about the handling of money, sticky issues such as debt and financial plans for the future.

Andrew Howie, an experienced family law attorney who helps clients draft prenuptial agreements, recognizes the benefits of being open and proactive. “No one wants to get sick or injured, but we still buy health insurance,” Howie says. “No one wants to get divorced or die, but we should consider the effects of what will happen when death or divorce with your spouse occurs. A prenuptial agreement provides that peace of mind.”

What is a prenup?

A prenuptial agreement is a contract established prior to marriage that determines what will happen to premarital assets (such as property) in case the marriage ends or one spouse dies.

If your premarital estate is significant, it makes sense to ensure that your spouse will share in it only as much as you wish should you divorce or die. This is especially true if you have children from a prior relationship whose inheritance you want to protect. A prenup also can protect income and assets you acquire during the marriage. If you don’t set terms for those before you get married, you may end up paying unexpected support or alimony to your spouse.

Some states require each party to have an attorney to create a prenup and some don’t. Regardless, each party should have their own attorney working on their behalf to draft the prenuptial agreement to help to avoid a court declaring a prenup invalid. At the same time, you can consider important joint financial planning decisions such as life insurance, living trusts and estate plans.

While a prenup is a binding contract, you are able to amend it in the form of a postnuptial agreement if your circumstances change. Howie cautions, “Each state has its own interpretation and enforceability of marriage postnuptial agreements, so please consult with an attorney licensed in your state should you want to consider that action.”

Who needs a prenup?

It depends. Legal and financial experts provide differing views of the necessity of a prenup. One train of thought contends they protect the interests of both parties to the agreement and prevent nasty, costly court battles when a relationship ends, while some critics say the nastiness that can arise in negotiating a prenup can cripple a marriage before it even starts, and that there are laws that do a better job in most cases of balancing the interests of both spouses when they split or one dies.

Whatever position you take, you’ll most certainly benefit from sitting down together prior to your wedding and having the same open, honest conversation about money, debt and ownership that you would if you were discussing the terms of a legal prenup agreement.

So when does a prenuptial agreement make sense? Here are just a few examples:

  • If one spouse enters a marriage with significant assets of his/her own
  • If one spouse enters a marriage with significant real estate of his/her own
  • If one spouse expects assets from a family trust or inheritance
  • If one spouse has interest in a family business (or acquires additional interests in business during the marriage)
  • If one, or both, parties have a child(ren) from a prior relationship, the prenup can ensure the  child will inherit certain property from a deceased parent

Increasingly, millennials are seeking to protect intangibles such as intellectual property and business ventures. This demographic is knowledgeable and concerned about its fiscal future as well as cognizant of divorce rates.

Is a prenup right for you?

A prenup is not for everyone. But the following three steps can help you start to explore if a prenup is the right approach for you and your future spouse:

  1. Review the specifics of your circumstances:
    • Do you own any real estate or run a business?
    • How will you handle household expenses, bills and taxes?
    • Will all or part of your estate go to someone other than your spouse when you die, such as your children from a previous relationship?
    • If you need help determining these answers, seek the assistance of an attorney or financial professional who can provide objective advice.
  2. Find your comfort level:
    • What are your perceptions regarding the institution of marriage and how do they compare to the beliefs of your future spouse?
    • Are you uncertain how the terms of a prenup might compare to your legal rights without one?
    • Are you afraid you may offend your prospective spouse by asking about it, or that the discussion would escalate into an argument?
    • Conversely, do you not want a prenup and feel your future spouse is pressuring you to make one?
  3. Have a constructive, open discussion:
    • Share your honest opinions in a positive, blame-free manner about each other's needs and concerns.
    • Be willing to listen intently, without interrupting and without judgment.
    • Assume that you and your prospective spouse won't see eye-to-eye on everything, especially when you first start talking.

You may decide you don’t need or want a prenup.  Or you may decide you each have enough at stake to move forward with an agreement, so you can sign it and move on to more “romantic” negotiations — like where to book that honeymoon trip.


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